Minutes from the Federal Reserve’s September meeting show the majority of policy-makers expect a hike in U.S. interest rates by the end of the year.
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In Asia, share markets surged on Thursday in morning trade, tracking the overnight rally in the U.S. after the Fed kept interest rates unchanged on Wednesday despite hints of a hike later in the year.
Some seven members of the Federal Open Market Committee (FOMC), including Janet Yellen, voted against a raise while only three voted in favor. The decision not to raise rates reflected the evidence that labour-market slack continued and that inflation was still below target.
But, notably, three members thought the Fed should’ve gone ahead at its just-finished meeting. The federal funds rate – the interest rate banks charge each other – is now 0.5 percent.
Some experts supported the Fed’s decision, arguing that there are more risks to raising rates too soon rather than too late.
On Wednesday, Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren dissented on the policy statement, saying they favored raising rates this week.
The Fed raised its benchmark interest rate to a range of 0.25% to 0.50% in December, after almost a decade of holding rates near zero. But weak inflation and other economic indicators have kept the Fed from following its plan, and rates haven’t been raised since.
Most economists expect the Fed to leave rates unchanged. “The forecasts and the statement suggest a rate hike is increasingly likely in December, if conditions don’t change before then”, Warne said. That helped energy companies, and Anadarko Petroleum rose $2.55, or 4.4 percent, to $60.83 while Chevron added $1.53, or 1.6 percent, to $99.23. However, the Fed sees inflation remaining “low in the near term”.
The Fed is scheduled to release a statement at 2:00pm ET, followed by chair Janet Yellen’s press conference.
“We don’t see the economy is overheating now”, Yellen said, justifying the decision not to raise rates at today’s meeting.
Brent crude futures (LCOc1) rose 95 cents, or 2 percent, to settle at $46.83 per barrel, while USA crude futures (CLc1) rose $1.29, or 2.9 percent, to settle at $45.34. Scepticism about the sustainability of Tuesday’s moves, however, remains, particularly for the yen, which nevertheless clawed back much of its earlier loss. The Dow Jones industrial average rose 0.9 percent, the Standard & Poor’s 500 index surged 1.1 percent, while the Nasdaq composite climbed 1 percent on Wednesday.
Against the dollar, the European unit was down 0.2 percent at $1.1133.
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The yen eased against the dollar and the euro a day after the Bank of Japan left rates unchanged but introduced a new policy to manage the gap between short and long-maturity government bonds and pledged to overshoot its 2% inflation target.
